DP2738 | Merger Profitability in Unionized Oligopoly

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We examine how a merger affects wages of unionized labour and, in turn, the profitability of a merger under Cournot competition in differentiated products. If unions are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous wages. In contrast to the received literature, we find that it can be more profitable to take part in a merger than to be an outsider. For firm-specific unions, on the other hand, results are reversed.